Executive Summary on Present Anti-Dumping and Tariff Guidelines for Quartz and Millwork

Thank you for your continued support of MGroup™ and its brands, Mstone®, Mshower® Mteriors® and Gainwell International ™.   We have sent regular communications with fellow executives in the hospitality industry on the subjects of anti-dumping and additional duties and tariffs facing our industry beginning in April 2018, when the first glimpses of these politically-motivated anti-dumping policies were being considered. I hope that these updates continue to be helpful. Almost every day, I’ll receive a note from an industry manager saying that his VP or President has passed him the letter from me.

The protectionist trade policy process has targeted quartz from China and unfortunately has been expanded to other hospitality industry segments like vanities and millwork. We believe that there is enough clarity at this time that hospitality executives can begin to develop plans to provide a direction and a way forward within their organizations.

The Current Situational Analysis:

  1. China, the largest resource of quartz countertops for the hospitality segment, has been effectively eliminated as a resource due to the approximately 300% AD/CV duties. A very high percentage of the quartz countertops being produced by the top resources for the hospitality segment, including MStone®, had been produced in China.
  2. There is a “delta” estimated to be $250 million dollars, between the demand in the US market and the supply of product that is presently produced in the USA. Most domestic quartz slab producers focus on the high-end segment of the market and not the lower-priced and lower-margin hospitality and multifamily segments.
  3. Some Chinese sources developed an alternative product, “glass quartz”, first excluded from the anti-dumping case, but was later added to the decision. The sellers of “glass quartz” have only themselves to blame as their merchandising clearly indicated that the best reason to buy the “glass quartz” product was to circumvent the anti-dumping regulations and offered no advantage in performance. This strategy completely backfired.
  4. Low-cost production in India and Turkey has now come under the anti-dumping/countervailing case led by Cambria’s politically inspired strategy to unfairly reduce competition. If you were buying your quartz countertops through an Indian or Turkish producer, there is a high probability these products will face additional duties and tariffs. India is accused of subsidizing the quartz business but cannot even keep the electricity on for its millions of citizens, but the Trump Administration believes that India can manipulate trade on a worldwide scale. Incredible! So many of our Indian customers, many first and second-generation Americans, find this theory absolutely without merit but is yet another example of how these trade decisions are based on politics, not facts.
  5. To provide some relief to the huge gap in supply and demand, some Chinese producers are moving production to other countries like Malaysia, Cambodia, and Indonesia to produce quartz products, but some of these factories in these countries have yet to actually produce a square inch of quartz product. There is a major concern that some – not all – of these “factories” have very limited production and may simply be a transshipping point for unscrupulous sources, with yet another circumvention of the regulations bypassing Chinese produced products through countries with limited ability to scrutinize the actual country of origin.  Hospitality executives should make certain of the origins of quartz products that your companies are buying to steer clear of additional punitive charges related to the purchase of products that could be transshipped.

MGroup™ moved forward with a Euro-based quartz supply chain. We have a compelling value proposition:

  1. Total costs – materials and labor – are known, predictable, and controllable.  And, we are competitive with other sources of high-quality quartz countertops.
  2. Quality of product is exceptional –  one of the world’s best producers of quartz slabs, equipped with the most modern technology.  Fabrication in a highly automated facility with digital control of key processes.
  3. Shorter transit times for shipments coming to U.S. ports.
  4. No surprises – tariffs and duties are highly unlikely, versus ongoing uncertainty with respect to Asian resources.
  5. This is a proven supply chain with projects already completed, shipped,  and installed – and beautiful results. 

“At MGroup™, we have been totally involved in this endeavor to find strategic resources since this anti-dumping suit was first contemplated. Our strategy is somewhat different than most companies.”

We looked around the world for options for quartz countertops. The “obvious” choice was Vietnam but because of our existing business in Vietnam in the case goods and furniture segment, we know that Vietnam has concerns with:

Infrastructure – roads, rail and ports

Tight Labor Supply – young and inexperienced workers and a shortage of raw personnel

Limited Production Capacity – Vietnam is a “blip on the radar” compared to the production capacity of China

Most of MGroup’s™ quartz products are being produced in Eastern and Southern Europe. We are producing in areas of relatively high unemployment, tremendous industrial development initiatives, high education, and free of concerns about anti-dumping and countervailing duties. With this present Washington administration, it would be callous to say “free of all potential tariffs” but the likelihood of duties against the EU is significantly less than from China and third world regions.

Our quartz slabs are presently being produced in a highly efficient Spanish factory and being shipped to Eastern Europe for cut-to-size fabrication. Six months ago, the prices for MGroup’s™ Eastern European option were higher than the baseline Chinese pricing but was more certain and predictable and free of anti-dumping and countervailing duties. Six months later, Indian and Turkish production are less certain due to new tariffs and duties, “glass quartz” has lost its advantage as an option to quartz, and Vietnam does not have the capacity to make up the difference in expected supply and demand.

MGroup’s™ Eastern European supply chain for quartz is the best option for risk-averse clients.

Our European quartz slabs are produced on the world’s finest Bretton Italian processing equipment and are fabricated on an automated line with minimal hand finishing. A second Bretton line goes online this month to provide more capacity to meet the delta in supply.   More fabrication is planned in July and another fabrication expansion online in September. Compare this statement with statements from other supply chains that suggest movement of glass quartz or quartz projects from China to unproven factories with little to no experience makes sense.

Our European products are already approved as brand standards for many of the world’s hospitality brands.

If you want consistent, high-quality service, high-performance, the best quartz slabs in the market and countertops made in a controlled factory environment that has been doing this type of production for years, not days, like Malaysia, Indonesia or Taiwan, then give us a call at 706-350-4300 or send an email to info@mgroupcorp.com.

We also have other options for your hospitality countertop needs, which your MGroup™ representative can provide you with additional information.

Thanks for your support during these very difficult and politically-influenced times. Be assured, we have an excellent program in place and would invite you to ask your team to contact us.

Best Regards,

H. David Murray

President and CEO